StanChart lifts annual profit outlook, sets new $1 billion share buyback
Reuters
Published Jul 28, 2023 12:33AM ET
Updated Jul 28, 2023 08:11AM ET
By Selena Li and Lawrence White
HONG KONG (Reuters) -Standard Chartered PLC upgraded its annual profit forecast on Friday and set a new $1 billion share buyback after the best half-yearly performance in nearly a decade, as rising rates and a record financial markets business boosted the lender's margins.
StanChart is ahead of schedule on achieving five strategic goals set out 1-1/2 years ago, Chief Executive Bill Winters told reporters on Friday, as the Asia-focused lender intensifies efforts to tackle long-standing profitability challenges.
StanChart's first-half pretax profit marked its best half-year performance since Winters took helm in June 2015, and only second to that in the first half of 2013.
The lender upgraded its guidance for income growth in 2023 to a 12%-14% range from 10% previously, but only slightly modified its return on tangible equity target to 10% from
"approaching 10%".
StanChart, which earns most of its revenue in Asia, said statutory pretax profit for the first six months of the year surged 20% to $3.32 billion, beating the $3.18 billion analysts' estimate.
Investors were cheered by the results, with StanChart's shares gaining 5.5% in London and 3.6% in Hong Kong.
"We are mindful of the external macroeconomic headwinds and recent challenges in the banking sector; however, our balance sheet is robust, and we have the right strategy, business model and ambition to deliver our targets," Winters said in a statement.
StanChart's robust results showed how global market conditions were playing to the emerging markets-focused lender's strengths.
Rising interest rates are lifting lending income at its transaction banking business, which handles cash and payments for big companies, while its focus on trading rather than dealmaking in investment banking shields it from a slump in corporate mergers and fundraising.
Analysts at Jefferies hailed the set of numbers which exceeded expectations in most areas, with revenues beating the consensus forecasts and second quarter credit costs from loan losses coming at $146 million, below estimates of $260 million.
The bank said income growth outpaced increases in costs, despite inflation pushing up the latter, boosting its first-half cost-income by 3 percentage points to 61%.
TRANSACTION, MARKET BUSINESSES SHINE
The London-headquartered lender's transaction banking income shot up by 92% to $2.86 billion, with cash management income up 166%, helped by rising interest rates.
Retail product income was boosted by the low pass-through rate to grow 38% to $2.45 billion from a year ago, with deposit products income surging 172%.
Its financial markets business delivered a record $2.8 billion in income in the first half, up 4% from an already strong period a year ago driven by energy price swings.
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That contrasted with the prolonged slump in income at more deal-focused U.S. and European rivals.
U.S. banks, such as Goldman Sachs (NYSE:GS) and Citigroup (NYSE:C), earlier this month reported lacklustre investment banking results, while European rival Deutsche Bank (ETR:DBKGn) said on Wednesday revenue for the business will drop this year rather than stay flat because of sluggish deal activity.
Winters said the firm was on track to double its profit in China by 2024, despite losses in the country's commercial real estate sector, which narrowed in the second quarter.
The bank told Reuters in May it was looking to hire 100 staff for it's new China platform targeting niche bond deals.
StanChart's shares have surged 27% this year, partly on speculation that it may be the target of an acquisition. But they are still down around 37% since Winters assumed the top role eight years ago.
When asked if the bank has been approached since First Abu Dhabi Bank (FAB) in January said it was not currently evaluating an takeover offer for the British bank, Winters said: "we have no reason to think that they'll come back to us".
"They can't speak to us and they haven't spoken to us," he added, referring to a six month cooling off period required by UK takeover rules that ends in August.
Written By: Reuters
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